View Single Post
  #9  
Old 01-07-2002, 11:46 AM
Guest
 
Posts: n/a
Default a study should always show calls over-priced?



Call sellers need only get killed once every century to invalidate a 90-year study.


Any arbitrarily short study of options prices will show that those who bought options didn't get paid, and those who sold them did.


As you increase the length of the study, the number of times option buyers get paid, and the number of time sellers get killed, rises. This is true, even if only slightly so, at any sub-infinite length study, no?


Meaning any study, given that it does not extend from the beginning of time to the end, is more likely to exclude periods when call buyers got paid than when call sellers did. So what it shows, at its most sensitive, is a function of the length of the study. Am I wrong?


For a real-world example, I think biotech-stock options were jackpot-priced all thoughout the 1980's. Then Clinton came along with his health-care thing, and anybody short bio-tech puts got absolutely wrecked. But by that time, the bear-side jackpot players had gone broke and turned over many times.


eLROY
Reply With Quote